Football as a business

Football is an exciting sport, the most popular across the world. Even though India doesn’t a team to boast about, but  India has the big fan base here. Mostly fans of big English Premiere League teams like Manchester United, Chelsea, Arsenal, Liverpool, and of course few of the clubs from Italy,Spain and Gemany. South Asia has a big fan base, it has grown rapidly in the past decade, and is growing at an even faster pace.  Here are my thoughts on football clubs as a business house, albeit these are not conventional business houses.  

The Red Devils made headlines recently with the plan of an IPO to hit Singapore Exchange. There is approximately 190 million Manchester United fans in South Asia. This will give them a chance to own part of the club. Manchester United has a debt in the tunes of $500 million. Glazer family hopes to raise about a $1 billion via IPO, major chunk of the offerings would be in preference shares, allowing Glazer family to retain control. Man U was expected to be listed in October, however due to volatile market conditions it has been postponed till the end of this year. Man U was listed on London Stock Exchange before it was bought out by the Glazer family.

Football clubs in Germany, the Bundesliga operates on 50+1 rule. At least 51% of the club should be owned by members. As per reports from Reuters Bundesliga is the most profitable league in the world, with it’s operating profit about 172 million euros, whereas English Premiere League has an operating profit of 93 million euros, nearly half of Bundesliga’s. The maximum cost of running a football club goes towards wages of players. Most clubs shell out about 70% of their revenue as player wages. Incidentally  the culprits of such high payouts are not the major clubs but the small ones, who are under pressure to keep up with the titans. Recently 1860 Muenchen, a football club based in Munich,Bavaria was bought out by a wealthy Arabian business man for similar reasons as that of Man U.

Investing in a football club is more of sentimental in nature, or a boost to the ego, rather than being a sound business investment strategy. Revenues for most footballs clubs are on the rise, one MIGHT be able to make a profitable investment. But, personally I think it’s an irrational business and there is lot of irrational capital floating about it. These not like other corporate entities, sentiments attached to football clubs are lot different from any other business houses.